Robert Shiller: Address Income Gap, Tie It To Tax Rate (Video)

The US might be in the midst of a second housing and financial bubble, according to economist and Yale Professor Robert Shiller. Shiller and Financial Times commentator Martin Wolf were interviewed by Fareed Zakaria Sunday.

Zakaria asked Shiller and Martin to weigh in on the topic of executive pay at bailed out banks. Both agreed that they were "annoyed" and "irritated" with the issue.

Shiller warned that if the income gap is not addressed, it could do major harm to the US and create a country that even rich people don't want to live in. The professor proposed a tax tied to the income gap.

Shiller, an economist who foresaw the financial crisis, questioned sharp increases in urban housing prices and admitted that he's not entirely sure about what's fueling with the economic recovery.

According to Shiller, the US recovery is not purely because of the stimulus. Shiller believes that the recovery was spurred by "spontaeous" public confidence in the US government's response to the crisis--not necessarily the scope or quality of the response, but confidence that the crisis was being addressed.